Commenting on Moody’s cutting of its rating, Nokia said that while it is disappointed with Moody's decision, its impact on the company is limited.

“We are quickly taking action to position Nokia for future growth and success. Nokia will continue to focus on lowering the company's cost structure rapidly, improving cash flow and maintaining a strong financial position" It said.

“Nokia's financial position remains strong. As of June 30 2012, Nokia had gross a cash balance of EUR 9.4 billion, and a net cash balance of EUR 4.2 billion both balances being higher than one year ago. Nokia also has access to additional liquidity via a revolving credit facility of EUR 1.5 billion. This is entirely undrawn and available to the company through March 2016.”

Moody's slashed Nokia's credit rating by two notches to Ba3, saying it expects the struggling mobile phone maker to post bigger losses and burn more cash than previously expected.

"Nokia's transition in the smartphone business will cause deeper operating losses and consequently cash consumption in the coming quarters than we had previously assumed," the ratings agency said in a statement, adding that the outlook on all of Nokia's ratings remained negative.

According to AFP, Monday's downgrade came after Nokia last Thursday reported far worse-than-expected second quarter results, posting a net loss of 1.41 billion euros ($1.74 billion), about four times their loss of 368 million euros during the same period a year earlier and more than double the loss anticipated by analysts. 

Nokia, which recently lost its ranking of 14 years as the world's biggest mobile phone maker, dramatically changed its strategy a year and a half ago, deciding to phase out its Symbian smartphones in favour of a partnership with Microsoft. 

But Moody's said it was disappointed with Nokia's outlook and cautioned that its new Lumia smartphones, which the company is counting on to help it survive stiff competition from RiM's Blackberry, Apple's iPhone and handsets running Google's Android platform, were loss making.